WATTS CO., LTD.

Business Details

The company operates a directly-managed chain of 100-yen shops under banners such as "Watts" and "Watts with," and also sells wholesale to other companies. Domestically, it also operates new business formats such as the variety goods store "Buona Vita," the discount store "Real," and the lifestyle brand "Tokino:ne." Most stores are tenant-type located within shopping centers and similar facilities, and the company achieves rapid product supply through a direct-shipment system with manufacturers and wholesalers together with outsourced distribution centers. Net sales for the nine months ended May 2026 (Q3 cumulative) of FY2026 (ending August 2026) were ¥48,010 million.

Recent Overview

Achieved substantial profit growth in the Q3 cumulative period, with net sales up 4.3% and operating profit up 33.8%

During the nine months ended May 2026 (Q3 cumulative) of FY2026 (ending August 2026), existing store sales in the domestic 100-yen shop business performed well, rising to 104.0% year on year, supported by increased demand stemming from a boom in sticker products and a naphtha shortage linked to Middle East tensions. Gross profit margin improved by 0.2 percentage points year on year due to product mix optimization. Although labor costs and variable rents increased, this remained within plan, and the company achieved operating profit of ¥1,368 million (up 33.8% year on year) and ordinary profit of ¥1,416 million (up 39.3% year on year). On the financial side, in preparation for rising interest rates, the company reduced long-term borrowings by ¥1,912 million, improving its equity ratio to 51.0%. In its overseas business, the company closed all directly-managed stores (from 4 stores to 0) and fully shifted to expanding wholesale operations. The full-year earnings forecast remains unchanged (net sales of ¥63,000 million, operating profit of ¥1,500 million).

Key Products

Growth Drivers

• Improved product mix and higher average customer spending through the active introduction of higher-priced items, IP-licensed products, and collaboration products
• Continued conversion of stores to the Watts brand (Watts / Watts with), reaching 1,650 stores (85.4% of the total) at the end of Q3
• Reduced wait times during busy periods and labor savings at tenant-type stores through the introduction of self-checkout registers
• Expansion of the overseas wholesale business (supplying products to more than 30 countries) and strengthened efforts to develop and support new markets
• Diversification of revenue sources through new business formats such as "Buona Vita," "Real," and "Tokino:ne"
• Optimization of product assortments by location and customer segment using POS data, and revitalization of existing stores through renovations
• Enhanced brand awareness through social media (including a 30th-anniversary web commercial) and expansion of the customer base

Risks

• Rising raw material and logistics costs and impact on supply stability amid heightened tensions in the Middle East and similar factors
• Risk of rising procurement costs due to uncertainty in U.S. trade policy (additional tariffs) and fluctuations in overseas production costs
• Impact on procurement costs from fluctuations in the yen-dollar exchange rate
• Risk of sluggish personal consumption and accelerated frugality if price increases continue to outpace real wage growth
• Rising labor costs due to proactive base pay increases and minimum wage hikes aimed at improving employee treatment
• Risk of profit pressure from increased selling, general and administrative expenses, including rising variable rents
• Expansion of investment losses related to equity-method affiliates (¥43 million in the cumulative Q3 period, approximately 19 times the level of the same period last year)
• Risk of overseas business becoming dependent on wholesale and resulting earnings volatility following the complete withdrawal of directly-managed overseas stores